Preliminary report on the assessment of the criminalization of customs clearance in Ukraine from the perspective of EU law
According to various sources, annual budget losses are estimated at UAH 120-167 billion annually. In addition, smuggling distorts competition in the domestic market, creating an unequal playing field for bona fide businesses.
The social consequences are also significant: smuggling fosters corruption, fuels the shadow economy, and creates the basis for organized crime. This dramatically complicates Ukraine’s economic integration with the EU and makes it impossible for Ukraine to achieve sustainable economic growth. Even though customs clearance is a multidimensional phenomenon, the opinion that the repressive method is the most effective continues to prevail. At the same time, the Ukrainian authorities’ constant approaches to combating smuggling have failed. However, due to pressure from civil society and international partners, attempts to counter smuggling continued.
In particular, in 2021, the National Security and Defense Council of Ukraine (NSDCU) imposed sanctions against those involved in smuggling schemes. This was an unprecedented step and an attempt to resolve a long-standing and complex problem quickly. However, the effectiveness of this approach and the criteria for selecting “smugglers” has been debated.
In addition, the sanctions were temporary and aimed at isolating certain players in the illegal market rather than bringing them to legal responsibility. They did not solve the problem systematically. The absence of clear legal grounds for imposing sanctions also raised questions about their legality from the perspective of human rights and European law. Despite the President of Ukraine’s instruction to logically conclude the existing criminal proceedings against persons suspected of illegally moving goods across the customs border, none of the suspects has been brought to criminal responsibility.
At the same time, in April 2021, the President of Ukraine submitted to the Verkhovna Rada a draft law, Reg. No. 5420 “On Amendments to the Criminal Code of Ukraine and the Criminal Procedure Code of Ukraine on the Criminalization of Smuggling of Goods and Excisable Goods, as well as False Declaration of Goods.”
In December 2023, the Parliament adopted Law No. 3513-IX as a whole. On January 1, 2024, criminal liability for smuggling excisable goods was introduced, and on July 1, 2024, for smuggling other types of goods. Adopting the draft law on the criminalization of smuggling was one of the EU’s conditions for granting Ukraine macro-financial assistance for €1.5 billion, which Ukraine received from the European Commission on December 21, 2023. The purpose of the study is to analyze the legal construction of the adopted law, assess the compliance of domestic legislation with European standards, and evaluate the effectiveness of the adopted bill in terms of its application.
The preliminary report was prepared within the framework of the project “Assessment of the Criminalization of Customs Clearance in Ukraine from the Perspective of EU Legislation,” implemented by the Center for Social and Economic Research CASE Ukraine as part of the USAID/ENGAGE activity, which is funded by the United States Agency for International Development (USAID) and implemented by Pact. The contents of this report are the sole responsibility of Pact and its partners and do not necessarily reflect the views of USAID or the United States Government.